Page 584 - SAIT Compendium 2016 Volume2

IN 67 (2) Income Tax acT: InTeRPReTaTIon noTes IN 67 (2)
Result:
B Family Trust is a connected person in relation to A Family Trust under paragraph (b)(i) because it is a bene ciary of A Family Trust. C, D and E are connected persons in relation to B Family Trust under paragraph (b)(i) because they are all bene ciaries of B Family Trust. C, D and E are therefore connected persons in relation to A Family Trust under paragraph (b)(ii).
3.3 Connected person in relation to a connected person in relation to a trust 3.3.1 Paragraph (bA)
Connected person means –
3.3.2 A person who is a connected person in relation to the trust [paragraph (bA)]
All connected persons in relation to a trust are connected persons in relation to each other. For this purpose a trust
excludes –
• a portfolio of a collective investment scheme in property, and
• a portfolio of a collective investment scheme in securities.
A portfolio of a collective investment scheme in property is included in paragraph (e)(iii) of the de nition of a ‘company’ in section 1(1).† For purposes of the de nition of a ‘connected person’, a portfolio of a collective investment scheme in securities is treated as a company.‡ The bene ciary of a trust and a company in which the trust holds at least 20% of the equity shares or voting rights§ would therefore be connected to each other. Bene ciaries of the same trust are likewise connected to one another.
(bA) in relation to a connected person in relation to a trust (other than a portfolio of a collective investment scheme in property or a portfolio of a collective investment scheme in securities),‡ includes any other person who is a connected person in relation to such trust;
Example 8 – Connected person in relation to a connected person in relation to a trust
Facts:
B Family Trust and AC CC are the bene ciaries of ABC Family Trust. Are AC CC and B Family Trust connected persons in relation to each other?
Result:
AC CC and B Family Trust are both bene ciaries of and connected persons in relation to ABC Family Trust under paragraph (b)(i). AC CC and B Family Trust are therefore connected persons in relation to each other under paragraph (bA).
Example 9 – Connected person in relation to a connected person in relation to a trust
Facts:
ABC Trust holds all the shares in XYZ (Pty) Ltd. MNO CC is the bene ciary of ABC Trust. Are XYZ (Pty) Ltd and MNO CC connected persons in relation to each other?
Result:
XYZ (Pty) Ltd is a connected person in relation to ABC Trust under paragraph (d)(iv) and paragraph (e) because ABC Trust holds 100% of the equity shares in XYZ (Pty) Ltd (see 3.5.3 and 3.6.1). MNO CC is a connected person in relation to ABC Trust under paragraph (b)(i) because it is a bene ciary of ABC Trust. XYZ (Pty) Ltd and MNO CC are connected persons in relation to each other under paragraph (bA) as they are both connected persons in relation to ABC Trust.
Example 10 – Connected person in relation to a connected person in relation to a trust
Facts:
J and A, who are not relatives, are both bene ciaries of AJ Trust. K and B are respectively the spouses of J and A. Are K and B connected persons in relation to one another?
Result:
J and A are connected persons in relation to AJ Trust under paragraph (b)(i) as they are bene ciaries of AJ Trust. K and B are respectively relatives of J and A and connected persons in relation to them under paragraph (a)(i). K and B are connected persons in relation to AJ Trust under paragraph (b)(ii). K and B are connected persons in relation to each other under paragraph (bA) as they are both connected persons in relation to AJ Trust.
* The de nition of a ‘connected person’ was amended with effect from the commencement of years of assessment commencing on or after 1 January 2010, to exclude a portfolio of a collective investment scheme in securities and a portfolio of a collective investment scheme in property from a trust.
† Paragraph (e)(iii) was inserted by section 2(1)(a) of the Taxation Laws Amendment Act No. 22 of 2012 and applies in respect of years of assessment commencing on or after 1 April 2013. Paragraph (e)(iii) was amended by section 4(1) (f) of the Taxation Laws Amendment Act No. 31 of 2013 with effect from years of assessment commencing on or after 1 January 2015 to restrict its ambit to a portfolio of a collective investment scheme in property that quali es as a REIT.
‡ Proviso to the de nition of a ‘connected person’ in section 1(1).
§ Under paragraph (d)(iv) the company would be a connected person in relation to the trust.
576 saIT comPendIum oF Tax LegIsLaTIon VoLume 2